Japan - November 2021

S P OT L I G H T
Savills Research

Fukuoka Residential
Markets

Retail sales in Beijing were up 4.4% year-on-year to RMB539.8 billion in 1H 2018

Fukuoka Residential Markets

Fukuoka’s residential market remains resilient
Summary• Fukuoka has been the fastest
growing city among major
regional cities in Japan.
• The city’s compact andconvenient layout, young
demographics, andaccommodating attitude
towards new ideas attract
students, workers, andentrepreneurs.
• With the leadership of its
media-savvy mayor, Fukuoka
is striving to become a leadingcity in Asia with start-ups,
digital transformation, andredevelopment.
• The central areas, such as Tenjin
and Hakata, have seen sounddemographic growth, andredevelopment projects such
as Tenjin Big Bang and Hakata
Connected should further help
to make these areas attractive.
• A s a major beneficiary of
inbound tourism until the
pandemic, the progress
towards the normalisationof international travel is awelcoming development for
Fukuoka.

INTRODUCTION
Fukuoka is a rapidly growing city with its
population increasing 4.9% between 2015 and2020, the highest among the major 20 cities1
in Japan. While its economic size is smaller
than Tokyo, Osaka, and Nagoya, Fukuoka
boasts an established status in the Kyushu
region2 . The city continues to attract young
migrants, primarily from other areas in Kyushu
and from the neighbouring Chugoku region.
Additionally, unlike other major regional
cities such as Osaka and Nagoya, Fukuoka has
experienced positive population growth fromnatural causes (births minus deaths) and has
maintained a higher percentage of younger
demographics.
Since the city announced its Startup City
plan in 2012, Fukuoka has been trying to
attract domestic and overseas entrepreneurs.
For instance, Fukuoka is one of the first
cities to offer “start-up visas” to prospective
business operators. The city also runs apublic-private partnership Startup Café andencourages demonstration experiments using
city infrastructure. Perhaps encouraged bythese initiatives, major IT companies suchas LINE, Mercari, and Paidy have chosen
Fukuoka as their first regional operation
1 20 ordinance-designated cities, which does not include Tokyo’s
23 wards where the growth rate was 5.1% between 2015 and 2020.
2 Kyushu includes Fukuoka, Saga, Nagasaki, Kumamoto, Oita,
Miyazaki, and Kagoshima.

location. Furthermore, there are promising
Fukuoka-based start-ups including iQPS
whose second satellite was launched withElon Musk’s SpaceX rocket. Additionally,
companies such as Hope Inc. and Vega
Corporation that originated in Fukuoka
became listed recently.
In addition to its start-up culture, thecompactness and convenience of the city ispart of Fukuoka’s appeal. Indeed, the city
centre, Hakata, is only five minutes from
Fukuoka Airport by subway, and is also close
to Hakata Port. Another major commercial
hub, Tenjin, is also five minutes away from
Hakata by subway. Moreover, as illustrated by
the small difference in daytime and night-time
populations3 in Fukuoka, its residential areas
are generally situated closely to commercial
areas. In fact, the mayor of Fukuoka often
compares the city with Seattle for theirgeographical similarities.
Prior to the pandemic, Fukuoka also
benefited from the boom in inbound tourism
helped by its proximity to other Asian regions.
While the pandemic has effectively stopped
inbound tourism, the city is expected tosee further growth in this sector once
international travel resumes.
3
The night-time population is the number of residents inFukuoka. The day-time population incorporates the flow of
workers and students who commute in and out of the city.

MAP 1: Fukuoka City

HigashiTenjin Station

Hakata Station

Chuo

Hakata

Nishi
Jonan

Minami

SawaraSource Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

2

Fukuoka Residential Markets

Furthermore, the delivery of largescale commercial projects, such as Tenjin
Big Bang and Hakata Connected, bodes
well for future growth. The former plansto redevelop 30 buildings around Tenjin
Station by 2024 while the latter plans toredevelop 20 buildings around Hakata
Station by 2029. Encouragingly, the firstbuilding of Tenjin Big Bang, Tenjin BusinessCenter, boasts face rents of JPY30,000 per
tsubo, a rental level closer to top rents in
Osaka and Nagoya and has had solid leasing
activity despite the ill-timed opening during
the pandemic. International names such as
Boston Consulting Group are expected toopen offices here. Moreover, the ongoing
extension of Nanakuma Line will provide
a new connection between these two areasand improve their accessibility within thecity, which will likely further increase thevalue and rental levels of the Tenjin area.
FUKUOKA AS A KEY REGIONALCENTRE
Fukuoka is strongly connected with thewider Kyushu region, and its growth is
supported by the many people that migrate
to the city. According to data released
by Fukuoka City, in 2020, about 8,500
people came from other areas in Kyushu
in net-migration, re-affirming Fukuoka’srole as an urban centre within the region.
Furthermore, over 70% of these migrants
are aged between 20-29, showing the large

Fukuoka’s residential market
remains sound with its fundamentals
underpinned by its positive migrationand vibrant business environment.
The city’s compact and convenientlayout, young demographics, andaccommodating stance towards new
ideas are attractive characteristics.
Major redevelopment projects such
as Tenjin Big Bang and Hakata
Connected should further boost thecity’s growth.
number of young people moving in.
The overall migration trends in Fukuoka
indicate that the city dominates on aregional scale, although it admittedly
experiences a net population outflow to theGreater Tokyo and Greater Osaka regions.
This rings particularly true for the Greater
Tokyo area, which is undoubtedly the

MAP 2: Fukuoka Redevelopment Map

Tenjin Big Bang

New Nanakuma Line

Hakata Connected

Source City of Fukuoka, Savills Research & Consultancy

3

central focus of national migration patterns
because of its overwhelming share of major
companies and educational institutions,reflecting a deeply rooted migration trend inJapan that is unlikely to change in the nearterm.
Nevertheless, Fukuoka benefits becauseof Kyushu’s geographical distance fromother metropolitan areas. Looking at
net-migration patterns from prefecturesin Kyushu, Fukuoka is clearly the top
destination and surpasses all other major
cities by a large margin (Graph 3). People inJapan tend to stay close to their hometowns,
and moving into Fukuoka is a reasonablechoice for people from Kyushu as it provides
the best balance between job opportunities
and proximity to home.
Fukuoka’s population growth comes fromtwo sources – the aforementioned migration
to the city, and natural causes (morebirths than deaths). Regarding the latter,
Fukuoka’s population grew organically by
0.6% between 2015 and 2020. Moreover,in Hakata ward and Chuo ward wheredemographics are younger, the increase
from natural causes was 1.3% over the same
period. This is uncommon in Japan where
the number of deaths has outpaced births
on a national level since 2005. Indeed,other major cities including Osaka City andNagoya City have also started seeing moredeaths than births. Nonetheless, population
increments from natural causes have also
been weakening gradually in Fukuoka, withsome recent months even seeing declines.
As such, migration movements to the city

Fukuoka Residential Markets

GRAPH 1: Fukuoka’s Migration Flows, 2020

-2,11914,021

11,902

Greater
Tokyo

8

1,

49
4

31
,9

77
,12

16

40,351

4

8,

53

Others
97

85

,3

,6

15

22

KyushuSource Ministry of Internal Affairs and Communications, Savills Research & Consultancy

GRAPH 2: Japanese Net-migration to Fukuoka and Corporate Profits, 1986 toQ2/2020
Corporate profits (RHS)
90

16

80

14

70

12

60

10

50

8

40

6

30

4

20

2

10

0

0

TRILLION

THOUSAND PEOPLE

Fukuoka
18

Source Ministry of Internal Affairs and Communications, Savills Research & Consultancy

GRAPH 3: Net-migration from Prefectures in Kyushu to Major Cities, 2020
Fukuoka

Tokyo 23W

Osaka City

Nagoya City

2,500

NET-MIGRATION

2,000

1,500

1,000

500

0

-500
Nagasaki

Kumamoto

Kagoshima

Saga

Oita

Miyazaki

Source Ministry of Internal Affairs and Communications, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

4

will be increasingly important in supporting
Fukuoka’s population growth.
Overall, Fukuoka’s population should
continue to grow at a steady pace due toemployment and education opportunities
in the city, as discussed in the following
sections. In addition to these pull forces,a push force from other prefectures also
seems to be at play because of the rapidly
ageing population in other prefectures in
Kyushu and some nearby prefectures in
Chugoku, which serves as an impetus foryounger people to move out of those regions,
to Fukuoka’s benefit. As discussed in our
Regional Residential Markets March 2021,
municipalities with higher proportions of anelderly population are financially weaker andhave less growth potential.
EDUCATION
Fukuoka is a popular university destinationin the Kyushu region and continues todraw a large number of students each year.
According to the Ministry of Education,
Culture, Sports, Science and Technology’s
yearly survey in 2020, about 27,000 students
entered universities in Fukuoka Prefecture.
Of that figure, approximately 30% camefrom the surrounding Kyushu region, andthe majority of the remainder came from the
nearby regions of Chugoku and Shikoku. This
indicates that Fukuoka continues to be theprevailing centre within the region.
Fukuoka is home to many highly ranked
universities such as Kyushu University,
Fukuoka University, and Seinan Gakuin
University. One notable trait of theseeducational institutions in Fukuoka is thatthey are concentrated in the city and highly
accessible from city centres. Indeed, theconcentration ratio of institutions for higher
education in Fukuoka is one of the highest
among Japan’s 20 major cities, and the cityalso boasts one of the highest proportions ofstudents.
Furthermore, the appeal that Fukuoka
poses to international students has
increased in recent years. International
students in Fukuoka Prefecture haveincreased from 5,731 to 19,260 between
2005 and 2020 according to Japan Student
Services Organisation. This total number ofinternational students is the third highest
in the country after Tokyo and Osaka.
Moreover, the aforementioned Kyushu
University had the fourth largest numberof international students among Japan’snational universities, accepting 2,300
students from overseas in 2020, not far fromother prestigious national universities suchas Kyoto University (2,600).
Similar to our discussions on Osaka andFukuoka Residential Markets

GRAPH 4: Japanese Population Changes by Cause in Fukuoka, 2001 to 2020
Migration

Other

Natural causes % (RHS)
50%

18,00045%

16,00040%

14,00035%

12,00030%

10,000

25%

8,000

20%

6,000

15%

4,000

10%

2,000

5%

0

0%

-2,000-5%% SHARE OF NATURAL CAUSESPOPULATION CHANGE

Natural cause
20,000Source City of Fukuoka, Savills Research & Consultancy

GRAPH 5: University Student Ratios by City, 2020

% OF UNIVERSITY STUDENTS

12%
10%
8%
6%
4%
2%
0%

Source Ministry of Education, Culture, Sports, Science and Technology,
Ministry of Internal Affairs and Communications, Savills Research & Consultancy

GRAPH 6: Kyushu Business Establishments by Prefecture, 2016

BUSINESS ESTABLISHMENTS

250,000

200,000

150,000

100,000

50,0000

Source Kyushu Bureau of Economy, Trade and Industry, Savills Research & Consultancy

5

Nagoya in our previous reports (Osaka
Residential Markets August 2021 and Nagoya
Residential Markets October 2021), thelarge student population in Fukuoka adds
vibrancy to the area and anchors residential
market demand. Indeed, attracting
well-educated, future entrepreneurs is ofstrategic importance especially for Fukuoka,
which aspires to be the “Start-up City”.
EMPLOYMENT
Fukuoka’s economy is noticeably smaller thanthose of Tokyo, Osaka, and Nagoya. However,within the Kyushu region, Fukuoka clearly
has the largest economic base, and its status
as a regional economic hub drives population
inflows from nearby prefectures.
A notable factor adding momentum
to the local economy is Fukuoka’s pushfor cultivating a start-up culture, led by
Fukuoka’s current mayor Takashima.
Takashima, a former news broadcaster,
became the youngest mayor in Fukuoka’s
history and has spearheaded the “Start-up
City” plan launched in 2012. He has been reelected twice with overwhelming popularity,
which validates the support that Fukuoka
residents have for his vision.
A notable example of Fukuoka’s initiativeis its public-private partnership with LINE,a popular social media operator, that hashelped the digital transformation (DX) of
public services including the Fukuoka Smart
City Community that launched in October
2020. The mission of the partnership is tomake Fukuoka a leading smart city througha collaboration among prominent regional
companies. For instance, through Fukuoka
City’s LINE account, residents can gather
vital information when some natural
disasters are affecting the city.
While these DX initiatives are helpful
for the residents, the city’s accommodating
attitude towards new ideas is also attractive
for those looking for real world test
grounds. For instance, Welmo, a prospective
healthcare start-up, chose Fukuoka to kickstart its business because the founder feltthat the city was serious about advancing
information communication and technology(ICT) applications in the healthcare
sector. The company has also done several
demonstration experiments in the city.
Kyushu University is also conducting a social
experiment using video camera images tolocate people with disabilities who requireassistance.
Fukuoka is also eager to attract
entrepreneurs from overseas. In 2015, one
year after Fukuoka was designated as one
of Japan’s National Strategic Special Zones,
Fukuoka became one of the first cities toFukuoka Residential Markets

GRAPH 7: Fukuoka Population as of June 2021 and CAGR* between 2010 and 2020
June 2021 Population

CAGR (2010-2020) (RHS)

350

1.8%
1.6%

300

THOUSAND PEOPLE

1.4%
250

1.2%

200

1.0%

150

0.8%
0.6%

100

0.4%
50

0.2%

0

0.0%
HigashiMinamiHakataSawara

Nishi

Chuo

Jonan

Source Ministry of Land, Infrastructure, Transport, and Tourism, Savills Research & Consultancy*CAGR stands for compound annual growth rates.

GRAPH 8: Fukuoka Net-migration by Age Group, 2020
0-9

10-19

20-29

30-39

Over 40

Total

4,000
3,000

NET-MIGRATION

2,000
1,000
0
-1,000-2,000-3,000-4,000Higashi

Chuo

SawaraMinami

Jonan

HakataNishi

Source Ministry of Land, Infrastructure, Transport, and Tourism, Savills Research & Consultancy

GRAPH 9: Fukuoka Net-migration by Origin, 2020
Fukuoka

Kyushu

Other

Total

4,000
3,000

NET-MIGRATION

2,000
1,000
0
-1,000-2,000-3,000-4,000Higashi

Chuo

SawaraMinami

Jonan

HakataNishi

Source Ministry of Land, Infrastructure, Transport, and Tourism, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

6

offer “start-up visas” to prospective business
operators 4 . Additionally, at places such as
Startup Café and Global Startup Center,
multilingual staff are able to offer various
kinds of support to foreign entrepreneurs,
from general consultation to talentmatching services.
Another factor that could support
Fukuoka’s further economic growth istourism. Prior to the pandemic, Fukuoka
also benefited from rapid increases in
inbound tourists. From 2011 to its peakin 2018, the number of overseas visitors
entering through either Fukuoka Airport
or Hakata Port increased five-fold. Nearby
Asian regions made up the majorityof overseas visitors, with South Korea
comprising 51% in 2018. In 2018, tourist
spending amounted to JPY530 billion,
equivalent of about 6% of Fukuoka City’s
nominal GDP5 , up from 4% in 2011. While
the pandemic has effectively halted inboundtourism, the city is expected to see further
growth in this sector once regional travel
resumes.
STRONG POPULATION GROWTH IN
CENTRAL AREAS
Looking closely at the ward level, the speedof population growth varies widely within
the city. Like other cities, Fukuoka’s central
districts such as Hakata ward and Chuo ward
have seen particularly strong growth over the
past decade (Graph 7).
Analysing net-migration patterns by age
and by ward, it is clear that the young 20-to29-year-old age group is a major driver ofthe population inflow in Fukuoka, especiallyinto Hakata ward and Chuo ward (Graph
8). This is not surprising as this age group
includes many single workers who value
proximity to the workplace over apartment
size. Meanwhile, Graph 8 also shows that
Hakata ward and Chuo ward see a notable
outflow of people in the 0-to-9-year-old and
30-to-39-year-old age groups. This trend
suggests that once people get married andhave children, they tend to move from thesebustling central areas to suburbs.
Going forward, Hakata ward andChuo ward will likely see further growth
supported by station-front redevelopments.
In Hakata ward, Hakata station underwent
a major renovation concurrent with thecompletion of Kyushu Shinkansen andthe building JR Hakata City in 2011, which
was further followed by the openings ofKitte Hakata and JRJP Hakata Building
in 2016. The ward’s next project, Hakata
4 The start-up visas provide foreigners who starts a businessa six-month exemption from usual business manager visa
capital requirements.
5 As of the report date, 2018 GDP figure is the most up-todate.

Fukuoka Residential Markets

Connected, will see the redevelopmentof 20 old buildings over the next ten
years. Meanwhile, in Chuo ward, Tenjin
is currently undergoing a massive projectcalled Tenjin Big Bang. The Tenjin Big Bang
Project covers an 80-hectare area around a
500-meter radius of the Tenjin intersection
with plans to redevelop 30 old buildings andcreate an additional 313,000 sq m of officespace by 2024. The aforementioned Startup
Café and Fukuoka Growth Next are also
located in this ward and currently housemany start-up companies.

GRAPH 10: Fukuoka Rents, 2016 to Q3/2021
2,400

JPY / SQ M / MONTH

2,300

2,200

2,100

2,000

1,900

2017

2018

2019

Q3

Q1

2020

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

Q2

1,800
2021

Source Savills Research and Consultancy

GRAPH 11: Fukuoka Occupancy, 2016 to Q3/2021
100%

99%

98%

97%

96%

2019

Q3

Q1

2020

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2018

Q2

Q3

Q4

Q1

2017

Q2

Q3

Q4

Q1

2016

Q2

Q4

Q3

Q1

Q2

95%
2021

Source J-REITs, Savills Research & Consultancy

GRAPH 12: Expected Cap Rates for Residential Properties, 1H/2003 to 1H/2021
Osaka

NagoyaFukuoka

SendaiTokyo: Jonan

Tokyo: Joto

9%

7%
6%
5%
4%
3%
2%
1%
0%
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H

EXPECTED CAP RATE

8%

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20 21

Source Japan Real Estate Institute, Savills Research & Consultancy

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FUKUOKA RESIDENTIAL LEASING
MARKETThe demographic trends discussed in theprevious sections have driven residential
demand in Fukuoka. Between Q1/2016 andQ3/2021, the average rent in the city has
increased by 17% while occupancy rates havebeen constantly above 96%. Furthermore,unlike Tokyo, the pandemic has notadversely affected Fukuoka’s residential
market thus far.
Investment volumes for residential
real estate in Fukuoka have been limited
partially due to the shortage of welldesigned, multi-family assets available inthe market. Hence, the strong competition
for available assets has pushed yields
down. According to a semi-annual survey
conducted by Japan Real Estate Institute,Fukuoka average multi-family expected cap
rates have compressed 180 basis points (bps)since 2012 to reach a record low of 5.2% in
1H/2021. However, multi-family yields inTokyo are currently at 3.9%, showing that
Fukuoka still provides a more attractive
level of return to investors. An analysis of
J-REIT recent transactions in 2021 indicatesthat actual yields in the city typically range
between 4% and 5%.
Noticeable residential transactions byoverseas investors in recent years include
the completion of the Anbang Residential
Portfolio in May 2020, with JPY28
billion reportedly invested into Fukuoka.
Elsewhere, Allianz Real Estate has been
active in the residential sector and included
Fukuoka as one of the target markets for
its newly launched US$1 billion Japan
multi-family fund. It is also rumoured thatthe company acquired some residential
properties in the city as part of a larger
portfolio acquisition from Blackstone in2019.

Fukuoka Residential Markets

OUTLOOK
Fukuoka’s residential market has been
underpinned by the city’s strong population
growth thus far. Moreover, unlike Tokyo, thepandemic has not significantly affected thecity’s market fundamentals, and few lifestylechanges have been induced. Indeed, Fukuoka
remains attractive with the job and educational
opportunities that the city offers as Kyushu’s
economic and social hub. This is further
bolstered by its young demographics, compact
and convenient city layout, and accommodating
business culture.
Going forward, the population growththat the city is experiencing should continue,
especially in the central areas, on the back of
the redevelopments around Tenjin and Hakata.
These projects plan to add a large amount of new

office and retail space, which should result in
more footfall around the areas, and surrounding
residential locations should consequently benefit
from the increase in vibrancy. Additionally,
with the population rapidly ageing in nearby
prefectures located in Kyushu and Chubu,
Fukuoka is likely to stand out as an attractive city
to move to for young people.
Nonetheless, Fukuoka’s population growthfrom natural causes is expected to be negative
for the first time in 2021 partially due to thepandemic, although organic growth was a factor
that added to the city’s stable population climb
over the past few decades. Therefore, the city’s
population growth may slow or become morevolatile, as it will have to rely on migration trends
which tend to be affected by changes in economic
conditions.

Overall, Fukuoka’s market fundamentals
should remain sound, supported by inflows ofyoung migrants. While opportunities are limited,
many overseas investors are eyeing Fukuoka tosupplement their residential portfolios in Japan.
However, if the recovery of Tokyo’s residential
market delays further while prices remain
elevated, Fukuoka may gain more popularity
along with other regional cities.

For more information about this report, please contact us
Savills Japan

Savills Research

Christian Mancini
CEO, Asia Pacific(Ex. Greater China)+81 3 6777 5150
cmancini@savills.co.jp

Tetsuya Kaneko
Managing Director, Head of
Research & Consultancy, Japan+81 3 6777 5192
tkaneko@savills.co.jp

Yoshihiro Kanno
Manager, Research &Consultancy, Japan+81 3 6777 5275
ykanno@savills.co.jp

Simon Smith
Regional Head of Research& Consultancy, Asia Pacific+852 2842 4573
ssmith@savills.com.hk

Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative
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